Wednesday, September 7, 2011

What is the US Balance of Trade

Balance of Trade Definition

The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; a negative balance of trade is known as a trade deficit or, informally, a trade gap.

The balance of trade forms part of the current account, which also includes other transactions such as income from the international investment position as well as international aid. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.

The Balance of Trade is identical to the difference between a country's output and its domestic demand - the difference between what goods a country produces and how many goods it buys from abroad; this does not include money respent on foreign stocks, nor does it factor the concept of importing goods to produce for the domestic market (source: wikipedia)

The numbers

U.S. trade deficit in goods and services increased to $53.1 billion in June from $50.8 billion (revised) in May, as exports decreased more than imports.
Exports decreased to $170.9 billion in June from $175.0 billion in May. Goods were $121.2 billion in June, down from $125.3 billion in May, and services were $49.6 billion in June, down from $49.7 billion in May.

Imports decreased to $223.9 billion in June from $225.8 billion in May. Goods were $188.8 billion in June, down from $190.7 billion in May, and services were $35.1 billion in June, virtually unchanged from May.

For goods, the deficit was $67.6 billion in June, up from $65.4 billion in May. For services, the surplus was $14.5 billion in June, down from $14.6 billion in May.

The May to June decrease in exports of goods reflected decreases in industrial supplies and materials ($2.0 billion); capital goods ($1.5 billion); foods, feeds, and beverages ($0.8 billion); and other goods ($0.5 billion). An increase occurred in consumer goods ($0.7 billion). Automotive vechicles, parts, and engines were virtually unchanged.

What does this mean? Well this means we are going further and further into debt with our only money maker being services. We do really great services, but where is all the other work going to? Corporations are going over seas for cheaper labor. Simply because the opportunity cost is close to zero in those areas. Is this ethical? Who knows, but in business, if you do not do it, someone else will and drive you out.